Employee Commission Agreements Need to be in Writing Soon

It’s tough to think about New Year’s Day on the 4^th of July, but January 1, 2013 is a date that nearly all California employers need to focus on.  By that date, and in accordance with California Labor Code §2751, all employee commission plans must be reduced to writing.  This means handshake deals for sales people are no longer permissible, and employees must receive written notice of how their commissions are computed and paid.  Employer and employee should each sign the contract.        

Don’t wait until the last minute.   It’s always important for employer and employee to have a clear written understanding of how wages are calculated.  Now is the time to review any existing written agreements to ensure that they comply with the law.  If you are still relying on oral understandings, now is also the time to put the signed written agreement in place.   

With extra attention being paid to commissioned employees next year, government agencies and employee representatives will likely focus on two related issues as well: 

1) Has the sales person been misclassified as an independent contractor instead of an employee? and

2) Has the sales person been properly classified as exempt from the overtime requirements under federal and state law?

While the risks under Labor Code §2751 may be relatively slim, the damages for misclassification are steep and continue to build year after year.  Don’t wait for the holiday season to arrive; act now to get your sales force wage and hour practices in order.

For more information or legal guidance related to written commission agreements and the proper classification of sales people contact Jennifer Phillips (jphillips@dpf-law.com) or Greg Walsh (gwalsh@dpf-law.com) in the firm’s employment department.